Protecting Your Assets

Looking for ways to protect your assets and plan for the future? At RAI, we understand the often complex plan designs and trust vehicles that can better position small business owners and their families in retirement and beyond.

Restrictive Property Trust (RPT)

A Restrictive Property Trust provides tax savings for long-term cash growth and income distribution from an employer sponsored plan for business owners and/or other key employees. The trust is funded using a life insurance policy and annual contributions are fully deductible by the employer.

Asset growth is realized through the cash value of the life insurance policy, which is distributed to participants when the plan ends. A RPT does not have income limits and contributions are tied to a reasonable contribution threshold. Participants select their own contribution levels since the plan is not a Qualified Plan.

Private Retirement Plans have become one of the most powerful protection and wealth preservation strategies in California in the last decade, because it can be structured as one of the strongest, safest and most cost-effective planning tools for anyone in California who is building private equity, business interests, real estate, or any other investment for their future retirement.

Get the best of both worlds! Maximize your opportunities for qualified plan contributions, which result in large tax deductions, AND implement a strategy to reduce the tax impact on the access and growth of your retirement plan assets.

The greatest expense most of us pay in our lives is taxes. Taxes have the largest financial impact on what we earn, what we spend, our investment returns and what is ultimately passed on to heirs. The impact of taxes is significant when accessing qualified plan dollars. There are great benefits generated from tax deductions on contributions. However, when it’s time to access the money, distributions are fully taxable at current rates. Any plan balance may be subject to both income and state taxes.

The Qualified Leverage Strategy (QLS) offers a solution to significantly reduce the tax impact on qualified plans. To summarize, the QLS approach does three things:

  1. Removes pre-tax assets locked in a qualified plan tax free via a sale.
  2. Repositions additional assets (outside the plan) into a more favorable tax position.
  3. Dramatically increases your after-tax retirement income and/or the wealth that can be passed on to the next generation(s) utilizing dollars both inside and outside the qualified plan.

Ideal QLS candidates have:

  • Qualified plan assets of $1,000,000+
  • A total net worth of $5,000,000+

For many high net worth individuals, life insurance can offer numerous benefits, including the potential for a tax-free death benefit that can protect their loved ones from bearing a large financial burden. This generally favorable tax treatment also means life insurance can be used for estate planning or business succession planning. However, life insurance policies with sizable premiums may create a liquidity issue of how to pay the high premiums required for these policies.

Borrowing strategically, as part of your comprehensive wealth plan, can align with your financial goals, including optimizing your cash flows, maximizing tax efficiencies, and realizing important estate financial planning goals. As such, life insurance premium financing is an example of a powerful way to use credit in the wealth planning process. Bank financing to fund your life insurance premiums may provide a tax-efficient option that allows you to preserve your current cash flow, avoid liquidating your investments, and leverage your wealth to provide future benefit to your heirs or charitable causes.

A life insurance premium financing strategy can help preserve your current standard of living since you don’t need to access your cash flow to make large premium payments. It also may allow you to avoid liquidating investments and related capital gains tax consequences in order to fund those payments.

Additionally, life insurance premium financing may provide a tax-free benefit that is not included in your estate and further help protect your net worth by facilitating the transition of your financial legacy to future generations. It may also provide a secondary positive arbitrage between the earnings crediting rate on the cash value growth and the carrying cost of the loan.

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